Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood

Transcription

1. The Islamic Quarterly : Vol: 69, No. 3 Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Omar Kachkar Mustafa Omar Mohammed Norma Md. Saad Saim Kayadibi 1 Abstract Refugee crisis has recently become the focus of international discourse, especially in the wake of the recent new influx of the Syrian refugees. According to the latest UNHCR report issued in June 2016, the number of displaced people reached 65.3 million including 21.3 refugees [UNHCR, 2016]. Most of the new refugees, like their predecessors in millions, will end up stuck in camps or temporary settlements for decades. Durable solutions proposed by UNHCR, notably repatriation, integration in local population and resettlement in a third country, have proven ineffective, insufficient and inaccessible for the majority of refugees. Another alternative solution of economic engagement of refugees was proposed. This has also remained out of reach to the vast majority of refugees mainly due to legal constraints, discouraging policies of host countries and lack of funds for NGOs to support refugee microenterprises. Furthermore, lack of access to finance and markets have remained on top of the challenges for refugees to start microenterprises. Hence the need for new institution and a viable model becomes imperative. This study employs Cash Waqf to develop a microenterprise support model for refugees (CWMES-R). The model addresses the main challenges of financing, marketing services and training in order to support refugee microenterprises. Keywords: Refugee, Microenterprises, Cash Waqf, UNHCR 1. Introduction The refugee crisis is increasingly becoming the focus of international discourse. Political conflicts, wars and persecution continue to force millions of people to flee their homes and seek refuge in more stable and secure countries. Recent years have seen a remarkable increase in the number of registered new refugees. Based on the UNHCR Annual reports 2010-2013, in 2010 there were only about 200 thousand new refugees registered by the UNHCR. The figure doubled four times to 800 thousand new refugees in 2011 and reached 2.5 in 2013, ten times higher than the figure in 2010. If calculated on daily basis, it is 1 Department of Economics, Kulliyyah of Economics & Management Sciences, International Islamic University Malaysia. The Islamic Quarterly: Vol: 69, No. 3 343
2. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood estimated that about 7000 new refugees were registered every single day in 2013 . The monthly figure would represent a population of a small city with 200 thousand people. For the first time since 1992, the number of refugees passed the 20 million thresholds (20.2 million) (UNHCR, 2015d). If this alarming rate of refugee influx continues for the next ten or twenty years, what catastrophic implications would that have for the entire globe? The majority of refugees spend decades in camps and temporary settlements or in poor urban areas. They eventually become stuck in what is known as ‘protracted situation’. It is estimated that three quarters of refugees [12 million] are considered in a protracted situation by the end of 2013. Twenty seven countries are hosting these refugees constituting an overall total of 33 protracted situations (UNHCR, 2013). According to the latest UNHCR report (UNHCR, 2014h) the average duration of the 33 protracted refugee situations at the end of 2014 is estimated to be about 25 years, and the majority of these situations (24) have lasted for more than 20 years. Examples of refugees in protracted situations include Somalis in Kenya, Eritreans in Sudan, Sudanese in Chad, Afghans in Iran and Pakistan, and Burmese in Thailand not to forget the Palestinian refugees (Betts, 2013) and (Milner and Loescher, 2011). UNHCR proposed these protracted refugee situations durable solutions, namely repatriation, local integration in host countries and resettlement in a third country. Over time, UNHCR and other humanitarian organizations realized that the proposed durable solutions were becoming ineffective, insufficient and impracticable. Hence UNHCR and partner organizations introduced the idea of economic engagement under several initiatives and logos, such as Livelihood Support, Self-Reliance, Self-Sufficiency and Developmental Aid and; under a number of projects such as Income-generating projects, Microfinance and Microcredit programs and Microenterprise initiatives. Although this notion of economic engagement of refugees started decades ago, its impact on the lives of the majority of refugees has remained negligible. Studies show that the majority of refugees have no access to such initiatives and programs coupled with the many challenges facing the development of economic engagement of refugees, particularly microenterprises. A preliminary survey of the extant literature shows that these challenges are classified into two. The first category relates to the challenges facing NGOs and humanitarian agencies and the second category is the challenges confronting The Islamic Quarterly: Vol: 69, No. 3 344
3. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi refugee micro-entrepreneurs. The present study critically discusses these challenges and develops a model that is viable to overcoming these challenges and provides support to improving the livelihood and social-economic situations of refugees. 2. Micro-enterprises for Refugees Supporting microenterprises for refugees has been initially introduced as part of promoting and supporting the economic engagement of refugees. It has been promoted due to the multiple advantages, which are favorable not only for the refugees themselves but also for other stakeholders as well, namely the host countries, donors and humanitarian agencies. The following discussion will focus on the characteristics, types of activities and advantages of microenterprises for refugees and other stakeholders. 2.1 Characteristics and Activities of Refugee Microenterprises Microenterprises (MEs) for refugees usually have the same general characteristics of microenterprises in normal situations. Traditionally MEs are distinguished as being small in size, informal, have low level of technology and normally need small capital to start up. They are run by the same types of micro-entrepreneurs who are poor and have little or no education, with low level of experience and training. A typical example of refugee MEs is found in the camp complex in Dadaab, Kenya, Buduburam camp in Ghana and refugee settlements in Uganda. According to Boniface (2012), activities of refugees in the camp complex in Dadaab, Kenya, include Internet cafes, butcher shops, hotels, barbershops, telephone bureaus, clinics, electricity suppliers and second-hand motor vehicle dealers. Addo ( 2008) in his study on the livelihood strategy of Liberian women refugees in Buduburam camp in Ghana finds that about 90 per cent of the refugees earn their livelihood through four professions: food vending, trading, hair dressing and dress making, as shown in the Table 1 below. Table 1: Activities of Refugees in Buduburam Camp in Ghana Income generating activities Food Vending Frequency 4 Percentage 8.0
4. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Trading Hair Dressing /Hair Plaiting Dress making Teaching Administrative work with NGOs Remittances “Susu” Collection Total Source: Addo (2008) 21 13 6 1 2 2 1 50 42.0 26.0 12.0 2.0 4.0 4.0 2.0 100 In another interesting research conducted by Betts et al (2014) on African refugees in Uganda, which covered two refugee settlements besides the capital city, Kampala, the research finds that refugees earn their livelihood from a wide variety of business professions such as food vending, trading, clothes making, beauty services and teaching. Refugees’ start-ups and income generating activities in these cases can be called Nano-enterprises where one person offers one product (Parkinson, 2014). Despite the simplicity and low-cost of such activities, these microenterprises have numerous advantages, not only for refugees but also for the other key stakeholders including local populations hosting refugees. 2.2 Existing Programs Microenterprises and Models for Supporting Refugee Microenterprise development programs for refugees are mostly organised by NGOs and humanitarian agencies. Such programs aim at providing necessary means for refugees to enhance their livelihood and achieve self-sufficiency. The American Refugee Committee (ARC) in its ‘Stepped Approach for Improving Livelihoods (SAIL) defines Microenterprises programs as “programs whose objectives include both the development of profitable Microenterprises for clients and the sustainable provision of services that help microenterprises (credit, training, etc.). These programs tend to be longer term and are employed in more stable environments.” (ARC, n.d: 94). This definition includes start-up capital, training and all other complementary services for the creation and development of microenterprises. Thus, the programs comprise the financial as well as the nonfinancial services such as training, consultation and The Islamic Quarterly: Vol: 69, No. 3 346
5. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi monitoring. Most institutions involved in microenterprises support for refugees provide both types of services. Several NGOs have initiated microenterprises support programs for refugees. These organisations include Christian Outreach, Relief and Development (CORD), International Rescue Committee (IRC), the American Refugee Committee (ARC) Income-generating project of World Relief in Maratane Refugee Camp, Nampula, Mozambique for refugees from central Africa especially Democratic Republic of Congo (DRC), Rwanda, and Burundi and the International Relief and Development (IRD) in Lebanon, UNRWA for Palestinians in Palestine’s neighboring countries, the Anglican Mission Development Ministry (AMDM) in Gambia the International Rescue Committee (IRC) in Kenya, World Relief in Mozambique, Arid Lands Development Focus (ALDEF), the Norwegian Agency for Development Cooperation (NORDA) in Kenya, Cooperative for Assistance and Relief Everywhere (CARE), The Ugandan Women’s Effort to Save Orphans (UWESO) in Uganda, Jesuit Refugee Service (JRS) in South Africa.(Organizations’ websites, 2015) Most of the programs offered by these NGOs operate in camp setting or in rural settlements, typically cases of many developing countries where the majority of the world refugees exist. However, in developed countries where the number of refugees who arrive by resettlement arrangements or by way of migration is small, microenterprise programs are supported by central governments with the aim of integrating the new comers into the society. Empirical evidences have shown the significant impact of micro-enterprises programs on the socio-economic situations of refugees. For example, a study conducted by the American Refugee Committee (ARC) reveals that 81% of start-up grants clients who did not apply for further loans after the first one, mentioned business as their main source of income. The study also shows that 91% of the clients, who took out basic loans without first receiving grants, indicated business as their main source of income. At the social level, 55% of basic loan clients have indicated that their social status had improved, and 60% of them said that they had gained pride, 60% were able to buy better clothes, 45% said they had more food, 47% had become more self-reliant, 33% were healthier and 38% no longer had to borrow money (Klerk and Nourse, 2004). Similar positive impacts were reported on the CORD microcredit program in refugee camps in Zambia. There was a significant increase in the income of the
6. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood beneficiaries , change in their diet and increase in the purchase of household goods (Jacobsen and Titus, 2004). Microenterprises development programs significantly vary from developed to developing countries based on many socio-economic and political factors. In developed countries, refugees have fewer challenges in starting and developing microenterprises due to several factors notably the little number of refugees in developed compared to developing countries. Furthermore, developed countries have good infrastructure and financial capabilities and, uncertainty is less compared to the situations in developing countries where refugees are always on the move to a third country. Hence, comparatively the environment and institutions in the developed countries are very supportive to microenterprises for refugees. To sum up, microenterprises have been extensively acknowledged as effective tools to assist refugees and improve their livelihood. However, despite all the initiatives and support given to refugee microenterprises, the gap between the demand and supply remains considerably wide. This gap is mainly due to lack of capacities of the local host countries coupled with other challenges, which have hampered the growth of such enterprises to their full potential. The following subsection will focus the discussion on three major challenges that refugee microenterprises face particularly in developing countries. 2.3 Major Challenges of Refugee Microenterprises The discussion in this subsection focuses on four major challenges that refugee microenterprises usually face, namely the legal challenge, low level of outreach of microfinance and micro credit programs, lack of marketing assistance and high financing cost due to high interest rate. Except for the legal challenge, the other three challenges are also the most common among micro-enterprises in general although they are more serious and evident in the context of refugees because of the unwillingness of the public and private sectors to get directly involved due to several political, social and financial reasons. Hence, refugee microenterprises do not normally receive government intervention and support programs in the form of subsidies and other relevant business facilities. Similarly, the private sector is unwilling to finance such programs they consider as risky and unstable. Therefore, the levels of outreach of the programs remain low, in addition to the lack of marketing assistance and the high financing cost. The Islamic Quarterly: Vol: 69, No. 3 348
7. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi 2.3.1 The Legal Constraints Imposed by Local Authorities Among the various challenges facing refugees in exile are the legal challenges. The international law of refugee emphasizes the responsibilities of host countries to ensure all types of freedom for refugees, including the economic freedom, access to work and employment. In the handbook of refugee protection prepared by UNHCR and Inter-Parliamentary Union (IPU) (2001:46) clearly states in that, “Economic and social rights apply to refugees as they do to other individuals. Every refugee should have access to medical care. Every adult refugee should have the right to work.” While medical treatment and sometimes access to education are available to refugees, economic rights and in particular access to employment has remained a major obstacle for refugees. Many host countries have persistently imposed many restrictions and constraints on the movement and economic rights of refugees. In this regard, a considerable body of literature has discussed the main constraints and restrictions imposed by host countries on refugees’ in particular under the theme of livelihood. These constraints include constraints on their movement, property ownership, work and employment opportunities. (Christensen and Harild ,2009; Jacobsen, 2004; Bartsch, 2003; Nourse,2003; Azorbo, 2011; Lyon, Sepulveda and Syrett,2007; UNHCR, 2014f). 2.3.2 Low Levels of Outreach of Programs Outreach has always been one of the main challenges of microfinance and microenterprise programs. It is estimated that, only four per cent of the overall global demand for microfinance services is being met. This low outreach of microfinance is due to several related challenges, the prominent being lack of funds. The Research department of Deutsche Bank in 2007 estimated the funding gap in microfinance market to be around USD 250 billion. Later PH and N Investment Service in their study increased the estimate to USD 300 billion in 2013 (Hes and Poledňáková 2013). In the context of refugees, there has not been any exact estimate of the outreach level of microenterprise or microfinance programs. However, such estimates can be derived. For example, the United States Committee for Refugees and Immigrants (2001) estimated that at the end of 2000 there were about 300,000 Sierra Leonean and 90,000 Liberian refugees in Guinea. About 4000 micro-
8. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood entrepreneurs from these refugees were the beneficiaries of ARC program for a period of two years . Comparing this number to the total number of refugees in Guinea, the outreach level appears very low. That is, only four per cent of the refugees are covered by the program within the two years period. Another study by Jacobsen and Titus (2004:5) on the CORD’s programs for refugees in Zambia also found low level of outreach because “the demand for loans of any size far exceeded the funds available for the program.” The same challenge is reported in the UNHCR recent programs for Syrian refugees. Table 2 below provides some statistics showing low levels of outreach; the gap between the total number of refugees and the actual support programs received by the beneficiaries of UNHCR and partner NGOs. Table 2: The Outreach Gap between the Total number of Refugees and the Actual Support Received by the Beneficiaries of UNHCR and Partner NGOs Country Total Number of Refugees Beneficiaries Outreach Gap [As % of the Total Refugees] 0.001 Turkey 1,758,092 1000 0.025 Lebanon 1.196,560 30,000 0.013 Iraq 249,861 3270 0.037 Egypt 133,862 5000 0.012 Total 3,338,375 39,270 Source: Based on UNHCR (2014f) and UNHCR (2015). Table 2 above clearly demonstrate the widening gap between the demand for livelihood and support programs including microenterprises and the actual available resources and programs being offered. This reflects the tremendous challenges confronting humanitarian agencies in promoting economic involvement and income generating projects for refugees. On top of these is the financial challenge. In fact, the UNHCR announced a funding shortage of about 81% in 24th April 2015 (http://data.unhcr.org). These challenges raise pertinent questions. When these organisations do not have enough funds to carter for the basic needs of the refugees how are they going to promote and develop microenterprises for refugees? When the existing programs have such low levels of outreach, covering very minimal number of refugees, what then happens to the situations of the other refugees? The Islamic Quarterly: Vol: 69, No. 3 350
9. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi 2.3.3 Lack of Marketing Assistance The second major challenge facing the refugee microenterprise programs is the lack of marketing assistance. Access to market is a traditional challenge not only for refugee microenterprises but for all SMEs in general. Obviously, micro-entrepreneurs, at the end of the day need the market to sell their products to support and enhance their livelihood. It is not enough to provide micro-entrepreneurs with training and financial assistance without giving them appropriate and sustainable access to market. SMEs, in particular the microenterprises, face numerous challenges to access the market, namely lack of financial and human resources, perception of function, attitudes and, lack of skills and experience (Carson and Cromie, 1989, cited by O'Dwyer et al, 2009). These reasons are even more serious in the context of refugees due to the lack of government support and NGOs hesitation. A number of good examples can be cited in the context of providing marketing assistance for microenterprises in general and refugee microenterprises in particular. For example Tanzania eco-Volunteerism (TeV) is an NGO founded in 2001, initiated a honey project which is a community development program to provide rural poor communities of Tanzania with an innovative microfinance model. Accordingly, the TeV will provide each family two beehives based on interest free loan (qarÌ Íasan) upon harvest, the family will sell the honey to TeV on fair market price. TeV in turn shall export the honey to wholesalers (http://www.cgap.org, 2015). In the context of refugees, an example of marketing assistance is found in one of the income generating projects. World Relief in Maratane Refugee Camp, Nampula, Mozambique assisted refugees in the Chicken Project to sell the chicken in the market (Feldman, 2005). Another example is the USA, Iskashitaa Refugee Network which is an NGO under the fiscal umbrella of St. Francis in the Foothills UMC, founded in the State of Arizona The organization has several programs to empower refugees living in Tucson area (Arizona). One of the programs is called Iskashitaa Refugee Sewing and Crafts Circle (IRSCC). According tto their website, This program is “…designed to empower refugees. Refugees are provided supplies and economic incentives to continue their traditional crafts. Refugees use skills such as sewing, weaving, and crocheting to create products that are sold during community events and at local stores. Seventy per cent of the profit made from selling refugee-made products goes directly back to the refugee crafter. The
10. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood remaining percentage is used to ensure that our programs are running smoothly and effectively . These items are available year round at Rain Crow Gallery, located at 204 W. Grant Road, or at Iskashitaa's office, located at 1406 E. Grant Road… Our products are available in our catalogue, by mail order, or by visiting Iskashitaa at a festival.” (http://www.iskashitaa.org, 2015). The above are some of the good example of marketing assistance that can be followed to market refugee products outside refugee camps and settlements. Online marketing is another potential that can be utilized to promote refugee products. 2.3.4 High Interest Rate The third major challenge as stated above is the high interest rate. This problem has always constituted a real concern for microenterprises and microfinance clients. Several microfinance institutions charge exorbitant interest rates from poor clients. This in turn has very serious impacts on the sustainability and development of microenterprises. Sinclair (2012:9) affirms that “Interest rates on loans, when all the various hidden charges are considered, are substantially higher than those stated, interest rates under 30% a year are disappointingly rare and rates approaching 100% or higher are disappointingly common.” Consequently, when the institutions burden the beginner entrepreneurs with such exorbitant interest charges, they indirectly encourage the “microentrepreneurs” to obtain another loan elsewhere to meet the repayments and often from the very moneylenders the microfinance community claim to replace.” (Sinclair, 2012:9). In the context of refugees, the interest rate charged is also very exorbitant. For example, the World Relief charged 5% on a monthly basis and 60% on a yearly basis (Feldman, 2005) and CORD charged 10% on a monthly basis and 120% on a yearly basis (Jacobsen and Titus, 2004). In addition to being unjust and unfair to refugees, interest charge has remained a real concern for many Muslim refugees around the world because it contradicts their religious beliefs. Muslims unfortunately constitute the vast majority of the world refugees. According to the UNHCR refugee’s report 2013, the highest refugees’ generating countries are actually Muslim countries, namely, Afghanistan, Syria, and Somalia. These three countries have produced about (53%) of the world’s refugees (UNHCR, 2013). This percentage will significantly increase if we add other Muslim conflict countries such as Iraq, Sudan, Yemen, Libya and Palestine. The Islamic Quarterly: Vol: 69, No. 3 352
11. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi Therefore, there is a need for finding an alternative model for refugee microenterprise. The new model should have the necessary features that address the three major challenges discussed above and should have high level of outreach, provide assistance for market accessibility and should operate at low cost free from interest charges. Most of these features can be derived from the institution of Waqf, which is increasingly becoming prominent in the Islamic finance industry. The present paper will use cash Waqf as the basis of developing the alternative model. 3. Cash Waqf and the Existing Models The institution of Waqf has recently witnessed a considerable interest especially in its role towards socio-economic development. Hitherto, there is hardly any study that has used Waqf to develop a model for refugee microenterprise. However, most of the literature included in the review in this section provides bases for the model to be developed in this paper. Some of the studies have structured the existing Waqf models to carter for financing and investment product needs. For example, Johari and Alias (2013) have identified seven instruments that are structured from Waqf, namely 1.Cash Waqf and Waqf shares. 2. Waqf in financing education. 3. Waqf in Microfinance. 4. Waqf as social bank /trust fund. 5. Waqf and Mudarabah Investment. 6. Waqf and Sukuk Investment and finally, 7. Waqf in business growth and economic development. Further six Waqf schemes are added to the list by Abdel Mohsin (2013): 1.waqf shares scheme, 2. Deposit cash waqf scheme, 3. Compulsory cash Waqf scheme, 4. Corporate Waqf scheme, 5. Deposit product Waqf scheme, and finally 6. Co-operative Waqf scheme. Other works have integrated cash Waqf into several models for socio-economic development and poverty alleviation. For example, Cash waqf for SMEs Asmy (2015); Hasan, 2011; Lahsasna (2010) and Tohirin (2010); for education, Aziz, Johari and Yusof (2013); for Microfinance, Alpay and Haneef (2015) Ahmad (2007); Masyita (2012); Nadwi, and Kroessin (2013) and Zarqa (2007); for Economic Development, Ibrahim, Amir and Masron (2013); for Financial Institution Abdel Mohsin.M (2007) and Haji Mohammad (2011) for non-profit financial intermediary, Elgari (2004); for poverty alleviation, Hassan (2010) Hassan and Ashraf (2010); for Microenterprises; Kahf (2004) and Ahmed (20013) for health care services.
12. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Furthermore , Cizakca (2004) suggests a model in which the concept of cash waqf can be used to provide microfinance to the poor. Elgari (2004) proposes establishing a non-profit financial intermediary called the qard hasan bank that gives interest free loan (qard hasan) to finance consumer lending for the poor. The capital of the bank would come from monetary cash waqf donated by wealthy Muslims. Kahf (2004) and Ahmed (20013) propose establishing a microfinance institutions based on zakah, awqaf, and sadaqat. They suggest that the returns from awqaf and funds from sadaqat can be used to finance productive microenterprises at subsidized rates. Hassan (2010) proposed a model for poverty alleviation by integrating the Islamic instruments of waqf and zakah with microfinance. According to this model zakah funds will be used to cater for two main purposes: to fulfill the basic needs of the poor clients and to provide them with the initial capital investment to start their micro-business. The waqf funds on the other hand will be used for both capital investment and working capital investments however in the initial stage the NGO can be involved only in working capital investment with mudarabah mode of financing. Additionally, waqf funds can be used in other types of investment such as investing in Islamic bonds or sukuk and in other financial institutions. Cash waqf has also been employed by Shabana Hasan (2011) to propose a model of a co-operative to enhance SMEs in Singapore. The proposed model utilizes the common method of cash waqf certificates to raise the required funds. Additionally, the co-operative could also collect funds through Shari’ah savings and takaful reserves. Collected funds could be used to provide financing to SMEs by way of qard Hasan. The proposed co-operative could also involve in investment activities using Islamic modes of finance such as mudarabah, musharakah ijarah, etc. Haji Mohammad (2011) suggests a model for a waqf bank based on cash waqf. The bank can be entrusted with cash waqf or collect cash waqf from the public. The collected funds shall be disbursed to achieve welfare of society. The repaid loans will be rotated to other borrowers and so on. Loans will be provided interest free; however a minimum service charge may be imposed to compensate for any defaults or unexpected loss. Furthermore, the bank can make some income from involvement in investment activities. A living example of cash waqf bank is the Social Investment Bank Limited (SIBL)’ in Bangladesh. SIBL produces cash waqf certificates and collect funds from benevolent participants and distribute the profits of the managed funds among the specified beneficiaries. According to Ibrahim et al (2013) the Cash waqf certificates issued by SIBL were the first in banking history whereby the The Islamic Quarterly: Vol: 69, No. 3 354
13. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi certificate provided an opportunity for Muslims in Bangladesh to invest in religious, educational and other social development. In a nutshell, as understood from the above proposed models, cash waqf has been instrumental for fund raising by NGOs and NPOs that issue shares and certificates with various low medium and high denominations. Such shares and certificates are purchased by potential individuals or institutions. Consequently, the issuing institution plays the role of the Mutawalli who manages the fund. The generated revenues through investment of these funds are channeled to the specified charitable purposes (Nadwi, and Kroessin, 2013). 4. Cash Waqf and the Proposed Refugee Microenterprise Model This study proposes to integrate cash Waqf as part of a comprehensive model to support microenterprises for refugees. The proposed model is called the Cash Waqf Micro Enterprises Support for Refugees (CWMES-R) model. It has the potential to address the three major challenges discussed in section 2 above. The first and third challenges arise because of lack of fund. That is, refugee microenterprise programs experience low outreach due to lack of fund. Similarly, clients have to borrow at high cost because of scarce sources for fund. Ultimately therefore, CWMES-R model will address two major challenges, namely 1) lack of funds and 2) lack of access to market. These two challenge have not been given due consideration in most models and programs initiated by NGOs. The subsequent subsection 4.1 discusses the conceptual framework of the model and subsections 4.2 and 4.3 focus on the operational steps of the model 4.1 Conceptual Framework of the CWMES-R Model The structure of CWMES-R model conceptual framework largely focuses on addressing the first major challenge, lack of funds. As shown in figure 1 below, the model introduces the use of temporary cash waqf to ensure the highest possible level of participation. Collected funds are then classified into two categories with different functions. Temporary cash waqf funds are allocated to cater for the financing of refugee microenterprises, while the perpetual cash waqf funds are invested in relatively secured and Shari’ah compliant investment. Revenues are used to cover the operational costs.
14. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Figure 1 : Conceptual Framework of CWMES-R Model Source: Developed by the authors * RME refers to Refugee Micro-Enterprise 4.2 Operational Steps of the CWMES-R Model inside Refugee Camps Providing microfinance or microcredit services to refugees is one of the facilities provided by CWMES-R model. The funds collected using the Temporary Cash Waqf Certificates (TCWC) will be used to finance refugee Microenterprises. This will overcome the challenge of lack of funds and the challenge of high interest rates (normally more than 50% annually) that many NGOs charge to cover their operation expenses. On the financing side, some Shari’ah compliant products will be used. The concept of qard hasan is a common practice among some Islamic microfinance institutions. This concept is utilised by Ahkuwat foundation for microfinance in Pakistan and Amanah Ikhtiar in Malaysia. Although qard hasan is a philanthropic practice recommended in Islam, it could pose a free service in the case of refugees, something which should be avoided (Nourse, 2003; Jacobsen et al., 2006). Free services are often repayment disincentives and are counterThe Islamic Quarterly: Vol: 69, No. 3 356
15. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi productive for efforts towards promoting economic self-sufficiency of refugees. Furthermore, qard hasan is not desirable for the sustainability of the model, which requires the investment of the cash Waqf to cover for the operating costs. Hence, qard hasan does not seem to be an ideal mode of financing for refugee microenterprises. Alternatively, other Shari’ah compliant modes of financing can be employed. By and large, the Islamic modes of financing vary with the project or profession being financed. Some projects and professions, particularly those inside the camps, require low-risk modes such as murabahah, Ijarah, diminishing Musharakah and bay’ bithaman al-Ajil or deferred sale etc. Figure 2 below illustrates the operational steps and the related flow of transactions for financing a project and profession within the refugee camps using the CWMES-R model. Figure 2: The Operational Steps of CWMES-R Model in Financing a Project or Profession within the Refugee Camps. Source: developed by the authors
16. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Based on Figure 2 above , the following are the operational steps of CWMES-R model in financing a project or profession within the refugee camps. 1. The applicant approaches the Administrative Office (AO) of CWMESR and applies for equipment, raw material or capital to be used in the project 2. AO sends the applicant's application containing all the necessary documents to the Assessment Committee (AC), which assesses the financial, training and marketing needs of the applicant 3. The documents are then returned by AC to AO. Unsuccessful applicants (NO) are informed by AO of the decision of AC. 4. Successful applications are forwarded to the Operation Department (OD) for implementation. 5. Based on the assessment from AC, the applicant is sent by OD to the Department of Training and Business Support (DTBS) to provide the required training. 6. The applicant reports to the OD after completing the training. 7. The applicant is then sent to the Supplier to acquire the equipment he or she had applied for in step (1) above. Here, the applicant acts as an agent of CWMES-R. Applicants who do not require training are also sent directly by the OD to the Supplier. It is worth noting that cash money is intentionally avoided to be handled over to refugees. It feared that needy refugees may spend the cash money on personal needs or for purposes other than income generating activities. 8. The applicant (refugee) acquire the equipment from the supplier as an agent for CWMES-R, the applicant reports back to OD to sign a formal The Islamic Quarterly: Vol: 69, No. 3 358
17. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi low risk Islamic financing contracts such as Murabahah (cost-plus sale), Ijarah, (lease) Diminishing Musharakah (partnership) and al-Bai' Bithaman Ajil (forward sale) to purchase and own the equipment or raw material from CWMES-R to himself. 9. The applicant now begins operating his or her Refugee MicroEnterprise (RME) business to offer products and services inside the camp. 10. The revenue generated is shared in three portions. Part of it goes to the applicant, another portion to CWMES-R through its Finance Division (FD) and the applicant is encouraged to donate the third portion to a Takaful Unit (TU) or fund. The TU is integrated into the model in order to provide guarantee for refugee microenterprises. Each and every interested refugee should join this unit before applying for any financial assistance. This unit is considered essential in the absence of any financial collateral and with the considerable ineffectiveness of social collateral in the refugee camp setting. This unit will actually depend on the recommendation of participants. In the sense that any new individual should have a signed recommendation from a member or more of old members of the TU. Additional function of TU will include providing financial assistance for refugees in emergency situations such as illness or unexpected accidents or death of any TU member. 4.3 Operational steps of the CWMES-R Model with marketing assistance Marketing is one of the most serious challenges for refugee microentrepreneurs. Refugees are usually not allowed to work in the host countries even when they work illegally they are often subjected to many forms of exploitation and blackmail by employers and local authorities alike. Therefore, marketing assistance is critical. The CWMES-R model proposes to include a marketing division to assist refugees to sell their products. This will require the participation of UNHCR and other partner organisations in marketing efforts. Some common methods of marketing products of refugee microenterprises could include organizing international trade fairs and local bazars and promoting online and catalogue marketing.
18. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood Priority products shall be determined by the department of marketing based on the market demand and on the workforce available in camps . Such products may include hand works, art works, clothes making etc. The study proposes the establishment of an international network of shops that can be utilised to market refugee products either to local refugees, urban and refugee in camps. The study also proposes the development of a specific logo to refer to refugee products. By this innovation, normal people around the world will be given the chance to participate and contribute to relieve some of the refugee’s challenges and sufferings. The following Figure 3 illustrates how marketing assistance works in CWMES-R model. Figure 3: The Operational Steps of CWMES-R Model in Financing a Project or Profession within the Refugee Camps and Marketing the Products and Services Outside the Camps. Source: developed by the authors Based on Figure 3 above, the following are the operational steps of CWMES-R model in financing a project or profession within the refugee camps and marketing the products and services outside the camps. The Islamic Quarterly: Vol: 69, No. 3 360
19. Omar Kachkar , Mustafa Omar Mohammed, Norma Md. Saad, Saim Kayadibi 1. The Marketing Department (MD) surveys the market place (locally or internationally) to identify the products and services needed in the market and can be produced within the refugee camps. 2. The MD provides the information to the OD. Applicants applying for CWMES-R facilities are informed of this option. If they are interested, training will be provided to them (some might not need training) to be able to produce the identified products and services identified in the MD survey. 3. The applicant is then sent by OD to the Department of Training and Business Support (DTBS) to provide the required training. 4. The applicant reports to the OD after completing the training. 5. The applicant is then sent to the Supplier to acquire the equipment he or she had applied for in step (1) of Figure 2 above. Here, the applicant acts as an agent of CWMES-R. Applicants who do not require training are also sent directly by the OD to the Supplier. 6. After acquiring the equipment, the applicant reports back to OD to sign a formal Islamic financing contracts. 7. The applicant signs a Murabahah contract to purchase the equipment or raw material from CWMES-R. The payment for these equipment and raw materials will be received by the supplier from the Finance Division of CWMES-R. In a separate contract (7a), the applicant signs an istisna’ contract with CWMES-R. The applicant will produce the products recommended by the marketing department and sell it to CWMES-R. All parameters and principles of istisna’ contract shall be fully observed including the specification of the products, the price and the delivery date. An agreed payment could be advanced to the refugee manufacturer at the time of signing the contract. This payment could be used to cover the operating costs of the manufacturer. The full
20. Integrated Cash Waqf Micro-enterprise Support Model for Enhancing Refugee Livelihood purchase price of the products shall be paid upon delivery . The finance Division shall always update the OD on the payment made by the applicant. 8. The applicant operates the Refugee Micro-Enterprise (RME) business inside the camp, produce the recommended products and deliver them to OD. 9. OD will then forward the products to the MD 10. MD will make all the necessary arrangements to sell the products at the market place and the revenue earned is placed at the Finance Division. The revenues generated are shared in three portions. Part of it goes to the applicant, another portion to CWMES-R through its Finance Division (FD) and the applicant is encouraged to donate the third portion to a Takaful Unit (TU) or fund. 5. Conclusion Deteriorating international peace and security has brought about in recent years an unprecedented phenomenon of displacement around the globe. The year 2014 has witnessed an increasing number of refugees estimated to reach three million, the highest on a yearly basis in the history of UNHCR. The total number of refugees is estimated at twenty million, almost three quarter of them are stuck in protracted situations with an average stay of over twenty years. The three traditional durable solutions have proven ineffective, insufficient and inaccessible to the vast majority of refugees. Economic engagement of refugees including micro-entrepreneurship has been at its minimal minimum level due to a variety of challenges, which have impacted the endeavors of refugees themselves to develop microenterprises as well as the endeavors of NGOs and humanitarian agencies to support refugees’ microenterprises. This study has found that beside the legal constraints and discouraging policies of host countries, lack of funds, and lack of human capital by refugees have also posed challenges for NGOs to support refugees’ microenterprises. Meanwhile lack of access to finance and lack of access to market have remained on top of the challenges for refugees to start microenterprises. Cash waqf has recently gained a great deal of interest among academics and practitioners in the field of socioeconomic development due to its several advantages in resource mobilization. The Islamic Quarterly: Vol: 69, No. 3 362
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